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A benefit for all?

Is an unconditional basic income the only way to ‘fix capitalism’, bypass broken social security systems and transform the traditional work ethic? Jonathan Arnold investigates.

12 Jul 2017

By the time you read this, Finland will be part way through a significant social, economic and cultural experiment. Last year Finland’s Prime Minister Juha Sipilä’s government declared that everyone living in the country has the right to what it calls “an adequate material existence”. Finland’s current social security system, “which has been gradually built up over many decades, was created under very different circumstances”, declared Sipilä. “Atypical work arrangements are now more common, and our social security system no longer meets modern requirements. For this reason, Finland is taking steps to test a new model of social provision.” As a result, 2,000 people between the ages of 25 and 58 will receive a monthly basic income of €560 (about US$600 or £475) for the two-year period. Sipilä believes that “a guaranteed basic income could create more flexibility in allowing people to accept a job without losing their benefits. It could also simplify and streamline the social security system and get rid of problematic disincentives.”

The unconditional basic income (UBI) payment in Finland is also tax-free and will not be reduced by any other income the participant may have, so if he or she finds a job they will get both the salary and the basic income. Could basic income actually increase employment, as the Finns evidently hope might be the case, and thus simplify the social security system?

It’s a big question to which there are, as yet, no definitive answers. Indeed, much of the debate surrounding UBI typically divides along ideological lines. Does UBI, in one fairly major swoop, ‘fix capitalism’ as some commentators argue? Will it radically change the centuries-old structure whereby one finds a job, gets paid (well or otherwise) and exists as best as one can on the wage earned? Or is it a recipe for disaster?

Finland is not alone in testing the very heart of what it means to work and/or receive state benefits. So far 14 countries around the world including Mexico, Brazil and South Africa have tested UBI, and in Switzerland, a referendum on its introduction failed but gave the discussion new impetus. Only two of these experiments offered true ‘unconditional’ basic income.

One of them was Canada, which trialled UBI for five years between 1974 and 1979. Around 10,000 people were given 500 Canadian dollars a month. As a result, hospitalisation rates fell by 8.5 per cent and high school completion rates increased because fewer young people opted for work instead of staying on at school. In India between 2011 and 2013, 6,000 people received US$4 per month, which may not sound like much but in rural India accounted for 40 per cent of necessary subsistence. The results were astonishing: improved food sufficiency, improved nutrition, reduced incidence of illness. Furthermore, and counter-intuitively, people were three times more likely to start their own business. Entrepreneurialism evolving from UBI was perhaps one of the less-predicted side effects of the experiment.

Right now the Dutch city of Utrecht is questioning whether its citizens’ “fundamental needs” are met without any obligation to work. There, the local government is planning to conduct an experiment that would give 250 Dutch citizens currently receiving government benefits a guaranteed monthly income. Some citizens of Utrecht and some nearby cities will receive a basic income of €960 per month (about US$1,100 or £815).

The Utrecht proposal – called ‘Weten Wat Werkt,’ or ‘Know What Works’ – includes six test groups, the members of which will receive slightly different stipends under slightly different conditions. In addition to the group that will receive €960 per month without any work obligations, there is a group that will be given an additional €150 at the end of the month if they provide volunteer services, such as doing maintenance work in school playgrounds. And there is another group that will have the same option to volunteer but will get the money at the beginning of the month and have to return it if they don’t volunteer.

This all sounds rather utopian and, on the face of it, is hard to argue against. However, none of the experiments so far conducted are in any way conclusive. They remain just that: experiments.

Federico Pistono, author of the influential book Robots Will Steal Your Job But That’s OK: How to Survive the Economic Collapse and Be Happy, has written and lectured extensively on the subject of UBI. He claims it is a “redistribution of wealth”, something that many pressure groups and others involved in the growing field of sustainable capitalism are calling for. Pistono cites Article 25 of the UN Declaration of Human Rights, which states: “Everyone has the right to a standard of living adequate for the health and well-being of himself and his family, including food, clothing, housing and medical care and necessary social services […].”

“Whatever solution we come up with,” says Pistono, “it’s not going to be a panacea because things need to be contextualised, and if they are implemented they must be comprehensive and look at the whole ecosystem. And they’ll be different in every country because of different social contexts and norms. Not everyone is at the same cultural level. The problem is we don’t have enough experiments or data.”

Georg Schuermann, Managing Director of ethical banking company Triodos Bank, avers: “I’m sure most people would make good use of a UBI that gave them more liberty than hitherto and would make productive contributions to society as a whole.” He adds: “Properly implemented, a UBI could promote positive change in our economic system as it results in human potential currently needed for gainful employment being released. Many critics claim, however, that it would promote laziness. People would simply put their feet up and not be motivated to do anything for themselves. I’m not convinced by such arguments. I’m sure most people would make good use of an unconditional basic income giving them more liberty than hitherto and would make productive contributions to society as a whole.”

Author and writer on economic affairs Ben Schiller, writing recently in Fast Company, neatly set out the different ideological approaches to – and arguments for – UBI: “The libertarian right likes basic income because it hates bureaucracy and thinks people should be responsible for themselves. Rather than giving out food stamps and healthcare (which are in-kind services), it thinks people should get cash because cash is fungible and you do what you like with it. Even a modest amount had incredible effects on people’s savings, economic status, health – so people felt in control of their lives. The left likes basic income because it thinks society is unequal and basic income is redistributive. It evens up the playing field for people who haven’t had good opportunities in life by establishing a floor under the poorest. The ‘precariat’ [a social class formed by people suffering from precarity, which is a condition of existence without predictability or security, affecting material or psychological welfare] goes from being perpetually insecure to know it has something to live on. That, in turn, should raise well-being and produce more productive citizens.”

Perhaps the last word should be with Triodos’s Georg Schuermann: “UBI could lead to an economy making our society much more equitable. One that isn’t solely based on maximising profits but on human, animal and environmental welfare. Many polls show this is just what people want. What’s lacking is large-scale implementation. A lot’s going on – but not enough. A UBI could change this state of affairs. It releases resources. The first evaluation of the experts in Finland and Holland will be extremely interesting. We’ll soon know more.”